Quantative easing - good time to have a mortgage?

chucky

mummytofour wrote: »

When we get hyper inflation we are all going to have to find a way out and not all of us can afford gold bars.

Looks like we should all cancel everything seeing that hyperinflation is definitely coming to the UK.

tuggy12

Generali wrote: »

You could drop it from a helicopter..............

Reminds me of the story when Gordon Brown took a flight to Edinburgh with Alistair Darling and Harriet Harperson.

They were discussing the dire state of the UK economy and Gordon said:
"Alistair, if you could print me a £1million pound note, I could throw it from this plane and at least one person in the UK would be happy."

Alistair thought for a moment and said:
"Would it not be better to print two £500k pound notes and then we could have two happy people."

Miss Harperson, being a true socialist said:
"No, no, no, we must have 1,000 £1,000 pound notes printed and then we could make 1,000 people happy."

The flight attendant, seving behind them, leant over and quietly said:
"I have a better suggestion. Why don't you three jump out of the plane and make 60 million people happy"

drbeat

chucky wrote: »

Looks like we should all cancel everything seeing that hyperinflation is definitely coming to the UK.

Hows it going Chucky? Haven't crossed swords with you for a while?

chucky

drbeat wrote: »

Hows it going Chucky? Haven't crossed swords with you for a while?

all good sir - swords don't get crossed just some discussion banter.
hope that you're well

drbeat

chucky wrote: »

all good sir - swords don't get crossed just some discussion banter.
hope that you're well

Yeah all good here cheers! Hopefully a banter-fest will show itself one day!

drbeat

Generali wrote: »

than if I give you a tenner to get a round in!

Will you be posting that tenner to me? I take it yours is a Fosters?

Generali

Harricks wrote: »

This has been interesting reading. Generali, you do seem to have some knowledge about these things. Any thoughts on the original question I posted? Is inflation a real possibility - in which case should those with savings let inflation erode the value of their mortgage rather than pay it back now, and secondly whether euro or dollar look a better currency than the pound for holding cash savings over the next year or so? Let the pound weaken, pay back the mortgage by having held cash in a stonger currency and have cash left over?

Inflation is a possibility but my feeling is that deflation is more likely than high inflation, assuming that the politicians aren't stupid enough to cause hyperinflation (inflation of say 10+%/month).

My reasoning is that due to Globalisation (which is a very good thing IMO for rich and poor alike) many more people in the UK are competing with Asians for their jobs. If we get a big increase in inflation (say to 10+% pa) then the UK will become less competitive so people will lose their jobs which will cut demand for goods and services which will lead to lower inflation. The system becomes self regulating.

The main caveat is that Governments seem to have a plan, to 'inflate away the problem'. This is what us economists call 'a load of old bollox' (sorry to get technical).

They may decide that their inflationary plans are so important that they need to impose import controls so they can create inflation. They may alternatively decide to continue fuelling inflation until the country is screwed.

If they are sensible they'll stop with the inflation thing once they realise it's making things worse. My experience of 'Democratic Socialism' is that when their policies fail (as they usually do), the concensus is that they failed because we didn't get enough Socialism rather than because we had too much.

prowla

If you owe money, then inflation is great; assuming that your salary will rise then your debt will stick at the old amount and so effectively reduce.
(Of course, the inflation could get you in other ways though.)

1echidna

Generali wrote: »

Inflation is a possibility but my feeling is that deflation is more likely than high inflation, assuming that the politicians aren't stupid enough to cause hyperinflation (inflation of say 10+%/month).

My reasoning is that due to Globalisation (which is a very good thing IMO for rich and poor alike) many more people in the UK are competing with Asians for their jobs. If we get a big increase in inflation (say to 10+% pa) then the UK will become less competitive so people will lose their jobs which will cut demand for goods and services which will lead to lower inflation. The system becomes self regulating.

The main caveat is that Governments seem to have a plan, to 'inflate away the problem'. This is what us economists call 'a load of old bollox' (sorry to get technical).

They may decide that their inflationary plans are so important that they need to impose import controls so they can create inflation. They may alternatively decide to continue fuelling inflation until the country is screwed.

If they are sensible they'll stop with the inflation thing once they realise it's making things worse. My experience of 'Democratic Socialism' is that when their policies fail (as they usually do), the concensus is that they failed because we didn't get enough Socialism rather than because we had too much.

I am not quite sure what to make of this analysis. I am not convinced that we are not in a completely unprecedented position with the bursting of the mother of all credit bubbles and rather forlorn hopes, given world competition, of earning our way out of the problem. On the one hand inflation may be rather unfair by helping the undeserving with large debts (including perhaps HMG?) and penalising those with savings and investments of who have been prudent. On the other hand if it was allowed to burn for a while (say at 5 to 10%) and interest rates were kept low is there not a chance that it would stimulate the economy and prevent many from falling into dire poverty? OK many who do not have inflation linked incomes would suffer, but as I see it as most are going to suffer (unemployment, reduction in public services), anyway this problem is tackled. This is perhaps the approach that best meets the mantra of 'protecting hard working families' OK a desperate solution which in many ways sends all the wrong signals regarding individual responsibility, fairness etc but perhaps the circumstances demand it?

Rick62

Why on earth would low interest rates and high inflation stimulate the economy?

The problem we have now (going forward) is who in their right mind would invest in buying or starting and developing a business in a market that is so dreadfully mismanaged and aribitarilly managed that that business could be destroyed almost overnight not by management mismanagement but by political policy?